Income-tax Officer, Ward -6 (3), Pune V. Subhash And B.T. Patil & Sons And N.V. Kharote Construction Pvt. Ltd, Pune

ITA 1505/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8079 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 13-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ULHAS KINI
• Keywords: Rule of consistency; Advance ruling; Relationship of principal and agent; TDS; Set aside
• Section: 143(3); 40(a)(ia); 194C; 40a(ia); 13

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI S.S. VISWANETHRA RAVI, JM . / ITA NO.1505/PUN/2017 / ASSESSMENT YEAR : 2013-14 THE INCOME TAX O F FICER, WARD 6(3), PUNE. . / APPELLANT V/S M/S. SUBHASH AND B.T. PATIL & SONS AND N V KHAROTE CONSTRUCTION PVT. LTD., 471, VISHNU BHAVAN, 4 TH FLOOR, NEAR PASODA VITHOBA MANDIR, BUDHWAR PETH, PUNE 411 002. PAN : ABPFS6926F. . / RESPONDENT ASSESSEE BY : SHRI ULHAS KINI REVENUE BY : SHRI DEEPAK GARG. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF T HE ORDER OF COMMISSIONER OF INCOME TAX (A) 4, PUNE DATED 06.0 2.2017 FOR THE ASSESSMENT YEAR 2013-14. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RE CORD ARE AS UNDER :- ASSESSEE IS A JOINT VENTURE CONSISTING OF SUBHASH PROJEC TS & MARKETING LTD., B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT . LTD., BELGAUM AND N.V. KHAROTE CONSTRUCTION PVT. LTD. IT IS STA TED TO HAVE / DATE OF HEARING : 15.01.2020 / DATE OF PRONOUNCEMENT: 21.01.2020 2 BEEN FORMED SOLELY FOR THE PURPOSE OF WORKING OF CONSTRU CTION OF JIHE KATHAPUR LIFT IRRIGATION SCHEME. ASSESSEE ELECTRONICALLY FILE D ITS RETURN OF INCOME FOR A.Y. 2013-14 ON 30.09.2013 DECLARING TO TAL INCOME AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER D ATED 18.03.2016 AND THE TOTAL INCOME WAS DETERMINED AT RS.28,61 ,50,770/- . AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE M ATTER BEFORE LD.CIT(A) WHO VIDE ORDER DATED 06.02.2017 (IN APPEAL NO.PN/CI T(A)- 4/82/2016-17) ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEV ED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND H AS RAISED THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD.CIT(A) WAS CORRECT IN DELETING THE ADDITION OF RS.28,61,50,769/- MADE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF PAYMENTS MADE TOWARDS SUBCONTRACT, WHEN THE ASSESSEE HAS FAI LED TO DEDUCT TDS FROM SUCH PAYMENTS U/S 194C OF THE INCOME TAX ACT, 1961. 2. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTIC ED THAT ASSESSEE HAD RECEIVED CONTRACT RECEIPTS AT RS.28,61,50,76 9/- AND THE AMOUNT WAS DISTRIBUTED AMONG THE MEMBERS AS PER THE D ETAILS ON PAGE 2 AT PARA 5 OF THE ORDER. AO NOTICED THAT ON T HE AMOUNT THAT WS PAID TO THE MEMBER COMPANIES, NO TDS WAS DEDUCTED BY T HE ASSESSEE. AO WAS OF THE VIEW THAT ASSESSEE IS REQUIRED TO DEDUCT TDS AS THE AGREEMENT BETWEEN THE ENTITIES WAS NOTHING BUT A CONTR ACT AND IT WAS LIABLE FOR DEDUCTION OF TAX U/S 194C OF THE ACT. THE ASSES SEE WAS ASKED TO SHOW CAUSE AS TO WHY THE AMOUNT PAID TO THE MEMBER COMPANIES ON THE ACCOUNT OF SUB-CONTRACT CHARGES NOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT, TO WHICH THE ASSESSEE MADE SUBMISS ION WHICH 3 WERE NOT FOUND ACCEPTABLE TO THE AO. AO THEREFORE HELD THAT THE PAYMENTS MADE BY THE ASSESSEE TO ITS MEMBERS WAS CLEA RLY TOWARDS OF CONTRACT CHARGES AND THE ASSESSEE SHOULD HAVE DEDUCT ED TDS U/S 194C OF THE ACT. SINCE THE ASSESSEE HAD FAILED TO DEDUCT TAX FROM SUCH PAYMENTS U/S 194C OF THE ACT, PROVISIONS OF SEC.40(A)(IA) OF T HE ACT ARE APPLICABLE. HE ACCORDINGLY HELD THAT ON THE FAILURE OF DEDUCTION OF TA X, THE PAYMENT MADE OF RS.28,61,50,769/- WAS REQUIRED TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT AND HE ACCORDINGLY DISALLOWED THE SA ME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MAT TER BEFORE LD.CIT(A). LD.CIT(A) FOLLOWING THE ORDER OF HIS PREDECESSOR FO R A.Y. 2014-15 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. AGGRIEVED BY THE ORDER LD.CIT(A), REVENUE IS NOW BEFORE US. 4. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND, AT THE OUTSET, SUBMITTED THAT AGAINST THE O RDER OF LD.CIT(A), REVENUE HAD PREFERRED APPEAL FOR A.Y. 2012-13. T HE CO- ORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 15.11.2017 (IN ITA NO.148/PUN/2016) HAS DISMISSED THE APPEAL OF REVENUE. HE SUBMITTED THAT SINCE THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THAT OF A.Y. 2012-13 IN ITA NO.148/PUN/2016 (SUPRA) AND FOLLOWING THE ORDER OF TRIBUNAL IN A.Y. 2012-13, NO INTERFERENCE TO THE ORDER OF LD.CIT(A) IS CALLED FOR. HE ALSO PLACED ON RECORD THE COPY OF THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN ITA NO.148/PUN/2016 (SUPRA). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPEC T TO DISALLOWANCE OF PAYMENTS MADE BY THE ASSESSEE TO THE ME MBER COMPANIES OF JOINT VENTURE U/S 40(A)(IA) OF THE ACT. WE FIN D THAT 4 IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE FOR A.Y. 2012- 13 WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUNAL FOLLOWING THE ORDER O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS. 2010-11 AND 20 11-12 (IN ITA NOS.113 AND 114/PUN/2015 ORDER DATED 09.08.2017) DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH R ESPECT TO DISALLOWANCE U/S 40(A)(IA) OF THE ACT. WE FIND THAT IDENTICAL I SSUE AROSE IN ASSESSEES OWN CASE FOR A.Y. 2010-11 AND 2011-12. THE CO-ORDI NATE BENCH OF THE TRIBUNAL VIDE ORDER DT.09.08.2017 HAS DISMISSED THE APPEALS OF REVENUE BY OBSERVING AS UNDER : 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO APPLICATION OF PROVISIONS OF SEC.40(A)(IA) OF TH E ACT. WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE C ASE OF SHRADDHA & MAHALAXMI JOINT VENTURE (SUPRA) ON IDEN TICAL FACTS AND AFTER RELYING ON THE DECISION IN THE CASE OF SW APNALI RDS JOINT VENTURE (SUPRA) HAS DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE BY HOLDING AS UNDER: 10. WE HAVE HEARD THE RIVAL AND PERUSED THE RECORD S. IN THE FACTS OF THE PRESENT CASE, THE ISSUE ARISING BEFORE US IS IN RELATION TO THE APPLICATION OF PROVISIONS OF SECTION 40A(IA) OF THE ACT. THE ASSESSEE AOP HAD RECEIVED CONTRACTS FROM THIRD PART Y WHICH, IN TURN, WAS EXECUTED BY THE TWO MEMBERS OF AOP. THE P LEA OF THE ASSESSEE AOP WAS THAT IT WAS CONSTITUTED FOR OBTAIN ING WORK AND RECEIVING PAYMENTS AGAINST THE SAID WORK DONE BY TH E CONSTITUENTS OF THE AOP AND THE SAID PAYMENT WAS TO BE DISTRIBUTED IN THE AGREED RATIO BETWEEN THE TWO MEM BERS OF THE AOP FOR CARRYING OUT THE WORK. SUCH ASSIGNMENTS OF THE WORK TO THE MEMBERS AS PER THE MEMORANDUM OF UNDERSTANDING AGREED UPON IS NOT EQUIVALENT TO SUB-CONTRACT AND AS SUCH THE ASSESSEE AOP WAS NOT LIABLE TO DEDUCT TAX AT SOURCE OUT OF T HE AMOUNT DISTRIBUTED AMONGST THE MEMBERS OF THE AOP IN THE A GREED RATIO OF SHARE. THE ASSESSING OFFICER, WHILE DECIDING THE ISSUE IN THE HANDS OF THE ASSESSEE, HAD GIVEN AN OFFICE NOTE TO THE EFFECT THAT IN THE CASE OF M/S. SWAPNALI RDS JOINT VENTURE (SUP RA), SIMILAR ADDITION UNDER SECTION 40(A)(IA) OF THE ACT HAS BEEN MADE FOR THE ASSESSMENT YEAR 2008-09 WHICH HAS BEEN DELETED BY T HE CIT(A)- II, PUNE. DEPARTMENT HAS FILED APPEAL AGAINST THIS ORDER TO ITAT AND THE MATTER IS PENDING BEFORE ITAT. TO KEEP THE ISSUE ALIVE IN OTHER CASES ALSO, THE SIMILAR ADDITION IS BEING MADE IN THIS CASE ALSO. THE FACTS AND CIRCUMSTANCES ARISING IN THE PR ESENT APPEAL ARE IDENTICAL TO THE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE THE TRIBUNAL IN M/S. SWAPNALI RDS JOINT VENTURE (SUPRA) , WHEREIN IT WAS HELD AS UNDER:- '2. AT THE OUTSET OF HEARING, LD. AUTHORISED REPRES ENTATIVE POINTED OUT THAT THIS CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY ITAT, PUNE BENCH, IN ITA.NO.65/PN/2011 FOR A.Y. 200 6-07 IN THE CASE OF ITO VS. GAMMON PROGRESSIVE-JV, WHEREIN VIDE PARAS 5 TO 9 THE TRIBUNAL DECIDING SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL OF THE REVENUE, HAS HELD AS U NDER: 5 '5. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT THE FIRST ISSUE IS REGARDING STATUS OF THE ASSESSEE. THE ASSESSING OFFICER HAS MENTIONED THE STATUS AS FIRM. HOWEVER, IN THE EXPLA NATION GIVEN, THE ASSESSEE HAS MADE IT CLEAR THAT THE STAT US IN WHICH THE RETURNS WAS FILED WAS THAT OF AN AOP. IT WAS EXPLAINED THAT IN THE RETURNS OF INCOME SINCE BEGIN NING TILL THE A.Y. 2006- 07, THE STATUS WAS MENTIONED AS AOP ONLY, I.E., WHEN THE RETURNS WERE FILED MANUALLY. HOWEVER , FROM A.Y. 2007-08, WHEN ELECTRONIC FILING HAD TO BE DONE , DUE TO COMPUTER ERROR THE STATUS APPEARED AS 'FIRM' ON THE ITR ACKNOWLEDGEMENT, WHEREAS IN THE COMPUTATION OF TOTA L INCOME, IT WAS CORRECTLY MENTIONED AS AOP. IT WAS EXPLAINED THAT I.T.RETURN FORM NO.5 WAS ACTUALLY APPLICABLE FOR FIRMS, AOPS AND BOIS. THEREFORE, THI S ERROR MIGHT HAVE OCCURRED. THE ASSESSEE HAS ALSO FILED COMPUTATION OF TOTAL INCOME ALONGWITH ACKNOWLEDGEME NTS FROM A.Y. 2002-03 TO A.Y. 2006-07 IN WHICH THE STAT US WAS REGULARLY SHOWN AS AOP AND EVEN IN THE APPLICAT ION FORM FOR ALLOTMENT OF PAN IT WAS SHOWN AS AOP. THE CIT(A) NOTICED FROM THE RECORD THAT STATUS WAS SHOWN AS AO P. HOWEVER, IT WAS NOT VERY MUCH RELEVANT FOR THE PURP OSE OF APPLICABILITY OF PROVISIONS OF SECTION 194C SINCE TDS PROVISIONS ARE APPLICABLE TO ALL ENTITIES EXCEPT IN DIVIDUALS AND HUF HAVING GROSS RECEIPTS OR TURNOVER FROM BUSI NESS OR PROFESSION BELOW THE PRESCRIBED LIMIT. 6. IT WAS FURTHER EXPLAINED ON BEHALF OF THE ASSESS EE THAT JOINT VENTURE AS SUCH DOES NOT EXECUTE ANY CONTRACT WORK BUT WERE MERELY FORMED FOR OBTAINING CONTRACT WORK AND FOR RECEIVING THE PAYMENT, WHICH WAS IMMEDIATELY DISTRIBUTED IN THE RATIO OF THE SHARE OF THE WORK D ONE. THE ACTUAL SHARE IN THE JOINT VENTURE OF THE TOTAL WORK ALLOCATED WAS 60% FOR M/S.GAMMON INDIA LTD. AND 40% FOR M/S.PROGRESSIVE CONTRACTION LTD. IN THIS BACKGROUND IT WAS EXPLAINED THAT THE CONTRACT ACCOUNT AND THE BAL ANCE SHEET OF THE JOINT VENTURE REVEALS NOTHING BUT APPORTIONMENT OF CONTRACT RECEIPTS, ASSETS AND LIAB ILITIES BETWEEN THE MEMBERS. THERE WAS NO EXPENDITURE BOOKE D IN THE CONTRACT ACCOUNT NOR ANY PROFIT AND LOSS ACC OUNT PREPARED FOR THE PURPOSE SINCE THERE DID NOT ARISE ANY PROFIT OR LOSS TO THE ASSESSEE PER SE. THE JOINT VE NTURE TRANSFERRED NOT ONLY THE GROSS REVENUE BUT ALSO THE CORRESPONDING TDS TO ITS MEMBERS IN THE RATIO OF TH EIR WORK DONE BY INDIVIDUAL MEMBERS FOR WHICH THE APPOINTMEN T CERTIFICATE WAS DULY ISSUED EVERY YEAR BY THE ASSES SING OFFICER. IN THIS BACKGROUND IT WAS SUBMITTED THAT T HERE WAS NO RELATIONSHIP OF CONTRACTOR AND SUB-CONTRACTO R BETWEEN THE JOINT VENTURE AND ITS TWO MEMBERS. THER EFORE, THERE WAS NO QUESTION OF APPLICABILITY OF TDS PROVI SIONS U/S.194C OF THE ACT. THE ASSESSEE ALSO EXPLAINED WH Y A RETURNS WERE FILED BY THE JOINT VENTURE AS AOP. IT WAS EXPLAINED THAT IT WAS DONE TO PASS ON THE CREDIT OF TDS TO THE MEMBERS ON THE BASIS OF TAX APPORTIONMENT CERTI FICATES WHO HAVE ACCOUNTED FOR THE CORRESPONDING CONTRACT REVENUE IN THEIR RESPECTIVE RETURNS. IT WAS ALSO SU BMITTED THAT 'NIL' INCOME ARISING IN THE HANDS OF THE AOP I S CONFIRMED BY THE ACTION OF THE ASSESSING OFFICER IN NOT ASSESSING ANY PROFIT/INCOME ARISING FROM THE CONTRA CT APART FROM THIS DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. THE ASSESSEE VIDE ITS SUBMISSIONS DATED 26.03.2010 AND 06.09.2010, EXPLAINED THE DIFFERENCE BETWEEN REVENU E 6 SHARING ARRANGEMENT ENTERED INTO BY THE JOINT VENTU RE VIS- A-VIS SUB- CONTRACT. IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT IN THE CASE OF SUB-CONTRACT, THERE WA S A RELATIONSHIP OF PRINCIPAL AND AGENT WHEREAS IN THE SITUATION OF REVENUE SHARING, IT WAS ON A PRINCIPAL TO PRINCIPAL BASIS. FURTHER, IN SUB-CONTRACTING, THE C ONTRACTOR RETAINS HIS SHARE OF PROFIT ALONGWITH THE TDS AND O NLY THE BALANCE IS PASSED ON TO SUB- CONTRACTOR. BUT IN JOI NT VENTURE, ASSESSEES DID NOT RETAIN ANY SHARE IN THE REVENUE WITH IT AND HAS PASSED THE ENTIRE GROSS REVENUE ALO NGWITH TDS APPORTIONED FOR THEM. IT WAS SUBMITTED THAT THE DEPARTMENT HAS ALSO ISSUED TAX APPORTIONMENT CERTIF ICATES EVERY YEAR DURING THE PAST EIGHT YEARS TO ENABLE TH E TWO MEMBERS TO CLAIM THE TDS CREDITS IN THEIR RESPECTIV E CASES. EVEN IN THE CURRENT ASSESSMENT YEAR, IT WAS NOTICE D THAT TAX APPORTIONMENT CERTIFICATE WAS ISSUED BY THE DEPARTMENT VIDE LETTER NO.PN/WD.3(4)/TC/07-08 DATED 26.11.2008 OF THE ASSESSING OFFICER IN WHICH THE ASSESSING OFFICER HAS ALLOWED APPORTIONMENT OF ENTI RE TDS OF RS.9,26,588/- DURING THE YEAR TO M/S.GAMMON INDI A LTD., SINCE ENTIRE WORK DURING THE YEAR WAS CARRIED OUT BY IT. SIMILARLY, THERE HAS BEEN APPORTIONMENT TO EITHE R OF THE TWO COMPANIES OR TO BOTH THE COMPANIES IN THE EARLI ER YEARS ALSO BY THE ASSESSING OFFICER FOR ENABLING TH EM TO CLAIM TDS IN RESPECTIVE CASES. THE ASSESSEE, VIDE I TS SUBMISSION DATED 22.04.2010, FURNISHED THE DETAILS WHICH REVEALED THAT GROSS REVENUE FROM THIS CONTRACT RECE IPTS BY JOINT VENTURE WAS ACCOUNTED FOR IN CASE OF EITHER O R BOTH OF THE TWO COMPANIES WHO WERE MEMBERS OF THE JOINT VEN TURE IN ALL ASSESSMENT YEARS 2001-02 TO 2008-09. IT WAS FURTHER EXPLAINED BY THE ASSESSEE THAT REVENUE SHAR ING WAS NOT EXACTLY 60:40 IN EACH YEAR SINCE IT DEPENDS ON THE RELATIVE WORK DONE IN THE PARTICULAR YEAR. HAVING EXPLAINED THE DIFFERENCE BETWEEN CASES OF CONTRACT/ SUB- CONTRACT, IN THE BACKGROUND OF CLAUSES OF THE AGREE MENT, THE ASSESSEE RELIED ON THE DECISION OF HON'BLE HIMA CHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. AMBUJA DARLA KASHLOG MANGU TRANSPORT COOPERATIVE SOCIETY (2009) 227 CTR 299 (HP). 7. IN THE BACKGROUND OF THE TAX APPORTIONMENT CERTI FICATES ISSUED BY THE ASSESSING OFFICER, IT WAS STATED ON B EHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS MARKED COPY OF THIS CERTIFICATE TO THE MEMBERS OF THE JOINT VEN TURE AS WELL AS TO THEIR RESPECTIVE ASSESSING OFFICERS, WHI CH SHOWS THAT THE ASSESSING OFFICER HAS APPLIED HIS MI ND AND CONSCIOUSLY ACCEPTED THE FACT THAT THE JOINT VE NTURE AOP WAS FOR THE DISTRIBUTION OF RECEIPTS AMONGST IT S CONSTITUENTS IN PROPORTION OF THEIR WORK SHARING. T HEREFORE, THERE WAS NO APPLICABILITY OF PROVISIONS OF TDS U/S.40(A)(IA) OF THE ACT. 8. FURTHER, THE ASSESSEE, VIDE ITS SUBMISSION DATED 06.09.2010, MADE COMPARISON OF THE TAX RATES APPLIC ABLE TO DOMESTIC COMPANIES, BEING JOINT VENTURE PARTNER IN THEIR INDIVIDUAL CAPACITY AND THE TAX RATES APPLICABLE TO THE AOP. HOWEVER, IN SUBMISSION DATED 21.10.2010, IT WA S EXPLAINED THAT TAX RATES IN THE CASE OF DOMESTIC CO MPANY AND THE AOP WOULD BE THE SAME IN THIS CASE. THIS WA S DUE TO APPLICABILITY OF SECTION 167B OF THE ACT. THE ASSESSEE ALSO FILED DETAILS OF THE RETURNS OF INCOM E OF THE TWO CORPORATE ENTITIES BEING JOINT VENTURE MEMBERS, 7 ALONGWITH ACKNOWLEDGEMENTS OF THEIR I.T. RETURNS, W HICH REVEALED THAT BOTH OF THEM HAD HUGE POSITIVE RETURN ED INCOMES EVERY YEAR. FOR THIS PAYMENT THE STAND OF T HE ASSESSEE WAS THAT THE METHOD OF APPORTIONMENT OF REVENUE TO THE MEMBERS WAS NOT TO TAKE ANY UNDUE BENEFIT OF LOSSES INCURRED BY THEM. THEREFORE, IT W AS STATED THAT THERE WAS NO LOSS TO THE REVENUE AS A RESULT O F THIS METHOD ADOPTED BY THE ASSESSEE OF SHARING THE GROSS REVENUE BY ITS MEMBERS, WHICH WAS TAXED IN THEIR HA NDS. HOWEVER, THIS EXPLANATION OF THE ASSESSEE DID NOT F IND FAVOUR FROM THE ASSESSING OFFICER. THE ASSESSEE HAS ALSO RAISED THE ISSUE OF CONSISTENCY STATING THAT THE SA ME METHOD WAS BEING ACCEPTED BY THE DEPARTMENT IN THE PAST 8 TO 10 YEARS INCLUDING A.Y. 2007-08 IN WHICH TAX APPORTIONMENT CERTIFICATE WAS ALSO BEING ISSUED. IT WAS CONTENDED THAT THIS ASPECT HAS NOT BEEN CONSIDERED IN THE ASSESSMENT ORDER U/S.143(3) FOR A.Y. 2007-08. ON TH E PRINCIPLE OF CONSISTENCY, THE LD. AUTHORISED REPRES ENTATIVE RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (2010) 228 CTR 582 (BOM.) AND ASSESSEE ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) WHEREIN IT WAS OBSERVED TH AT STRICTLY SPEAKING THE PRINCIPLE OF RES JUDICATA DOE S NOT APPLY TO INCOME TAX PROCEEDINGS SINCE EACH ASSESSME NT YEAR WAS A SEPARATE UNIT IN ITSELF AND WHAT IS DECI DED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR. IT WA S FURTHER CONTENDED THAT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS H AS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTI ES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPRO PRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YE AR. IT WAS ALSO CONTENDED THAT HON'BLE KERALA HIGH COURT I N THE CASE OF MANJUNATH MOTOR SERVICE AND CANARA PUBLIC CONVEYANCES, 197 ITR 321 (KAR.) OBSERVED THAT METHO D ADOPTED BY THE ASSESSING OFFICER WOULD RESULT IN DO UBLE TAXATION OF THE SAME INCOME SINCE GROSS RECEIPTS DISTRIBUTED AMONGST THE TWO JOINT VENTURE PARTNERS WAS INCLUDED AS RECEIPTS IN THEIR RESPECTIVE CASES AND THE JOINT VENTURE PARTNERS HAD ALSO UTILISED THE TDS CREDITS ON THE BASIS OF APPORTIONMENT CERTIFICATE ISSUED BY THE AS SESSING OFFICER. IN VIEW OF THE ABOVE DISCUSSION, CIT(A) WA S JUSTIFIED IN HOLDING THAT IN ABSENCE OF ANY CONTRAC T OR SUB- CONTRACT WORK BY JOINT VENTURE TO ITS MEMBER COMPAN IES, PROVISIONS OF SECTION 194C WERE NOT APPLICABLE FOR THE PURPOSE OF TDS. THE TWO CORPORATE ENTITIES FORMING JOINT VENTURE WERE ALREADY BEING ASSESSED SINCE A.Y. 2000 -01 ONWARDS ON THEIR RESPECTIVE SHARES AND TDS APPORTIONMENT CERTIFICATES WERE ALSO ISSUED BY THE ASSESSING OFFICER EVERY YEAR FOR THESE EIGHT YEARS INCLUDING THE CURRENT ASSESSMENT YEAR TO ENABLE THE M TO CLAIM THE SAME IN THEIR OWN CASES. MOREOVER, THERE WAS NO PROFIT AND LOSS ACCOUNT IN THE ASSESSEE'S CASE AND THERE WAS NO CLAIM OF ANY EXPENDITURE. THEREFORE, THERE W AS NO QUESTION OF ANY DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. MOREOVER, DISALLOWANCE U/S. 40(A)(IA) MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. IN EFFECT, THE METHOD ADOPTED BY THE ASS ESSING OFFICER WILL ALSO RESULT IN DOUBLE TAXATION OF THE SAME CONTRACT REVENUE WHICH IS IN VIOLATION OF THE KARNA TAKA HIGH COURT DECISION REPORTED IN 197 ITR 321 (KAR.). THIS 8 VIEW IS FORTIFIED BY THE DECISION OF THE ITAT PUNE BENCH IN ITO VS. RAJDEEP & PMCC INFRASTRUCTURE, WHEREIN THE TRIBUNAL HAS OBSERVED AS UNDER: '6. WE HAVE NOTED THAT IT IS AN ADMITTED POSITION T HAT NO WORK IS CARRIED OUT BY THE AOP, IT HAS ACTED AS A C ONDUIT BETWEEN THE MSRDC AND THE TWO PERSONS CONSTITUTING THIS AOP SO FAR AS THEIR SEPARATE, AND NEATLY IDENTIFIED , WORK AREAS ARE CONCERNED. A MERE EXISTENCE OF AN AOP CAN NOT LEAD TO TAXABILITY IN THE HANDS OF THE AOP UNLESS T HE AOP RECEIVES MONIES IN ITS OWN RIGHT. WE HAVE NOTED THA T HON'BLE AUTHORITY OF ADVANCE RULINGS WAS IN SEISIN OF A MATERIALLY IDENTICAL SITUATION IN THE CASE OF VAN O ORD ACZ BV IN RE(248 ITR 399) IN WHICH TWO CONTRACTORS JOIN ED HANDS FOR CARRYING OUT NEATLY IDENTIFIED SEPARATE W ORK WHICH WAS A PART OF COMPOSITE CONTRACT AWARDED TO T HE AOP, BUT THE TAXABILITY OF INCOME FROM SUCH CONTRAC T WAS HELD TO BE TAXABLE IN THE HANDS OF THE RESPECTIVE CONTRACTORS. WHILE HOLDING SO HON'BLE AUTHORITY FOR ADVANCE RULING OBSERVED AS FOLLOWS: '7. SO FAR AS QUESTION NOS. 1 AND 2 ARE CONCERNED T HE PARTIES HAVE SPECIFICALLY RULED OUT CONSTITUTION OF ANY PARTNERSHIP BETWEEN THEM. THERE IS NO SHARING OF PR OFITS OR LOSS. THEY HAVE SPECIFICALLY PROVIDED IN THE AGREEM ENT THAT EACH PARTY WILL BEAR ITS OWN LOSS AND RETAIN ITS PR OFITS AS AND WHEN SUCH PROFITS OR LOSS ARISE. HAVING REGARD TO THE AGREEMENT WE ARE OF THE VIEW THAT THE APPLICANT CAN NOT BE TREATED AS A PARTNERSHIP WHICH CAN ONLY BE CREATED BY AN AGREEMENT. NOR CAN IT BE TREATED AS AN AOP. IN ORDE R TO CONSTITUTE AN AOP THERE WILL HAVE TO BE COMMON PURP OSE OR COMMON ACTION AND THE OBJECT OF THE ASSOCIATION MUS T BE TO PRODUCE INCOME JOINTLY. IT IS NOT ENOUGH THAT THE P ERSONS RECEIVE THE INCOME JOINTLY. IN THE INSTANT CASE, EACH OF THE TWO PARTIES HAS AG REED TO BEAR ITS OWN LOSS OR RETAIN ITS OWN PROFIT SEPARATE LY. BOTH HAVE AGREED TO EXECUTE THE JOB TOGETHER FOR BETTER CO- OPERATION IN THEIR RELATIONSHIP WITH THE CHENNAI PO RT TRUST. THE INTENTION WAS NOT TO CARRY OUT ANY BUSINESS IN COMMON, ONLY A PART OF THE JOB WILL BE DONE BY VOAC Z ACCORDING TO ITS TECHNICAL SKILL AND CAPABILITY. TH E OTHER PART OF THE CONTRACT WILL BE EXECUTED BY HCC. THE T OTAL VALUE OF THE CONTRACT WAS RS. 2,62,01,03,120. THE APPLICANT'S SHARE OF WORK WAS VALUED AT RS. 44,52,7 8,920 (17 PER CENT OF TOTAL VALUE). THE ASSOCIATION WITH THE HCC WAS NOT WITH THE OBJECT OF EARNING THIS INCOME BUT FOR CO ORDINATION IN EXECUTING THE CONTRACT SO THAT HCC CO ULD ALSO MAKE ITS OWN PROFIT. HHC'S WORK AND INCOME ARISING THEREFROM WAS QUITE SEPARATE AND INDEPENDENT OF THE APPLICANT'S WORK AND INCOME. IF THE COST INCURRED B Y THE HCC OR THE APPLICANT WAS MORE THAN THEIR INCOME, EA CH PARTY WILL HAVE TO BEAR ITS LOSS WITHOUT ANY ADJUST MENT FROM THE OTHER PARTY. THE ASSOCIATION OF THE PETITI ONER COMPANY WITH HCC WAS UNDOUBTEDLY FOR MUTUAL BENEFIT BUT SUCH ASSOCIATION WILL NOT MAKE THEM A SINGLE ASSESSABLE UNIT AND LIABLE TO TAX AS AN AOP. FOR EX AMPLE, A BUILDING CONTRACTOR MAY ASSOCIATE WITH A PLUMBER AND AN ELECTRICIAN TO EXECUTE A BUILDING PROJECT. ALL T HESE PERSONS ARE DRIVEN BY PROFIT-MAKING MOTIVE. BUT THA T BY ITSELF WILL NOT MAKE THE THREE PERSONS LIABLE TO BE TAXED AS AN AOP IF EACH ONE HAS A DESIGNED AND INDEPENDENT R OLE 9 TO PLAY IN THE BUILDING PROJECT. IN THE INSTANT CAS E, THE APPLICANT HAS STATED THAT THE APPLICANT HAS MADE IT S OWN ARRANGEMENT FOR EXECUTION OF WORK INDEPENDENT FROM THAT OF HCC. THERE IS NO CONTROL OR CONNECTION BETWEEN T HE WORK DONE BY THE APPLICANT AND HCC.' 8. ON THE FACTS HEREINABOVE, THE APPLICANT AND HCC CANNOT BE TREATED AS AN AOOP FOR THE PURPOSE OF LEV Y OF INCOME-TAX. THE APPLICANT WILL BE LIABLE TO BE TAXE D AS A SEPARATE AND INDEPENDENT ENTITY. THE QUESTION NO.1 IS ANSWERED ACCORDINGLY.' 7. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE HON'BLE AUTHORITY FOR ADVANCE RULI NG. WE ADOPT THE REASONING OF THE HON'BLE AAR AND, RESPECTFULLY FOLLOWING THE SAME, APPROVE THE CONCLU SION ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE I N THE MATTER.' IN VIEW OF THE ABOVE DISCUSSION, WE ARE NOT INCLINE D TO INTERFERE IN THE FINDING OF THE CIT(A) WHO HAS DIRE CTED THE ASSESSING OFFICER TO DELETE THE ADDITION. THE SAME IS UPHELD. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED.' 3. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. 4. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF THE CIT(A ) WHO HAS RIGHTLY HELD THAT THERE IS NO QUESTION OF DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT. SAME IS UPHELD.' 11. SINCE THE FACTS ARE, MUTATIS MUTANDIS, IDENTICA L TO THE FACTS AND ISSUE DECIDED BY THE TRIBUNAL IN M/S. SWAPNALI RDS JOINT VENTURE (SUPRA), THEREFORE, FOLLOWING THE PARITY OF REASONI NG, WE UPHOLD THE ORDER OF THE CIT(A). CONSEQUENTLY, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 12. THE FACTS AND THE ISSUE IN ITA NOS.942 AND 943/ PN/2013, ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NO.944/PN/2 013 AND OUR DECISION IN ITA NO.944/PN/2013, SHALL APPLY MUTATIS MUTANDIS TO ITA NO.942 AND 943/PN/2013. 13. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON R ECORD TO POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE PRES ENT CASE AND THAT OF SWAPNALI RDS JOINT VENTURE (SUPRA). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CI T(A). THUS THE GROUNDS OF REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE FOR A.Y. 2010 -11 IS DISMISSED. 9. AS FAR AS APPEAL FOR A.Y. 2011-12 IS CONCERNED, SINCE BOTH THE PARTIES BEFORE US HAVE SUBMITTED THAT THE FACTS OF THE CASE FOR THE 10 ASSESSMENT YEAR 2010-11 ARE IDENTICAL TO THE FACTS OF THE CASE FOR A.Y. 2011-12, WE, THEREFORE, FOR SIMILAR REASONS STATED HEREIN WHILE DISPOSING OF THE APPEAL FOR A.Y. 2010-11 AND FOR S IMILAR REASONS, DISMISS THE APPEAL OF REVENUE FOR A.Y. 2011-12 ALSO . 10. IN THE RESULT, THE APPEAL OF THE REVENUE FOR A.Y. 2011-12 IS DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DIS MISSED. 6. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL O N RECORD TO POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS O F THE PRESENT CASE AND THAT OF THE EARLIER YEARS OR HAS PLACED ANY CONTRAR Y BINDING DECISION IN ITS SUPPORT OR DEMONSTRATED THAT THE ORDER OF ITAT IN ASSESSEES OWN CASE FOR EARLIER YEARS HAVE BEEN SET ASIDE / STAYED BY THE HIGH COURT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON T O INTERFERE WITH THE ORDER OF LD.CIT(A). THUS, THE GROUND OF REVENUE IS DISMISSED. 7. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECO RD TO POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE PRE SENT CASE AND THAT OF THE EARLIER YEARS I.E., A.YS. 2010-11 AND 20 11-12 IN ITA NOS.113 AND 114/PUN/2015 ORDER DATED 09.08.2017 (SUPRA) OR HAS PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT. REVEN UE HAS ALSO NOT PLACED ANY MATERIAL TO DEMONSTRATE THAT THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS. 2010-11 AND 2011-12 (SUPR A) HAS BEEN SET ASIDE / STAYED BY HIGHER JUDICIAL FORUM. IN VIEW OF THE AFORESAID FACTS AND RELYING ON THE DECISION OF THE TRIBUNAL IN ASSE SSEES OWN CASE IN A.YS. 2010-11 AND 2011-12 (SUPRA) AND FOR SIMILAR R EASONS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS, THE GROUNDS OF REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 21 ST DAY OF JANUARY, 2020. SD/- SD/- ( S.S. VISWANETHRA RAVI) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 21 ST JANUARY, 2020. YAMINI 11 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A) 4, PUNE. . PR.CIT-3, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER , / / TRUE COPY / / -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.